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Would it surprise you to learn that the top fraud scheme in 2014 was tied to property appraisals?Say it ain’t so! That’s according to information gleaned by Fannie Mae and Freddie Mac in their loan reviews.

Platinum Data Solutions, “The Appraisal Quality Company”, as they bill themselves, recently reviewed 300,000 new appraisals completed during the third quarter. They found inconsistencies in the reported property quality and condition ratings in 39% of the appraisals reviewed. These ratings did not match those of prior appraisals done on the same properties in Platinum’s database (Platinum)

The causes for these discrepancies aren’t easily identified. But, there is something which creates a difference. That difference may adversely affect the validity of the value provided which helps to determine a loan approval, and a consumer’s equity.

If the value provided isn’t accurate, it could have serious repercussions for a lender and a consumer down the road. Repercussions which could include a loan repurchase with the lender left with a property which will not support the outstanding debt.

It’s important for lenders to do a very careful analysis of the appraisal using all the tools available. These include systems like Platinum’s, as well as, collateral reviews offered by both Fannie and Freddie. These reviews, coupled with an aggressive pre-closing review program, will aid a lender in identifying not only appraisal problems but other loan problems, BEFORE a loan closes, allowing time for correction.

Don’t wait until it’s too late to find out that you have problems with your appraisals and/or your appraisers. Be proactive, underwriters are busy with last minute reviews for approvals and in clearing other conditions. Many times they just don’t have sufficient time (or maybe training) to perform a complete accurate appraisal review.

Don’t get caught with your value down. There are companies out there to help with tools to analyze all loan information, including the appraisal before you close a loan.

Using these companies and their tools will save a lender time and money by avoiding problems, delays, indemnifications and buybacks by identifying and allowing correction of defects prior to a loan closing.

These reviews are not a cost but an investment in quality, and in the lender’s success and survival in the future.

Are you making the investments needed to ensure the quality of your loans?

About the Author

Mike Vitali presently serves as the Senior Vice President and Chief Compliance Officer of LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties include the research, interpretation and analyzing of existing and proposed legislation related to the industry to recommend policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman’s Award from the MBA of PA,